Chapter 5 - Legal & Regulatory Flashcards
What is the reason for compulsory insurance?
What is the common link?
Pay for compensation
In response to national concerns
They are all liability insurances
How can compulsory insurance be subdivided?
Name examples for both
Private and professions / businesses
Private - 3rd party motor, public liability for dangerous animals
Professions - Motor insurance and employee liability
What is the minimum and recommended level of indemnity for employer liability?
5M, 10M
Where is public liability insurance compulsory?
Riding schools (public + riding persons)
How is dangerous animals liability usually purchased?
As an add on for home insurance
Which professions require professional indemnity insurance?
Brokers, solicitors
Who generally defends the claims made against the insured for compulsory insurance?
The insurance firm
Why does compulsory insurance continue even after business has ceased operations?
Liability claims are long tail, protects the consumer
What is a warranty?
A promise made to the insurer by the insured
How are warranties and duties of good faith breaches treated in liability contracts? - Enforced by which act?
Third parties must be compensated. Insurers then subrogate from insured.
Employer Liability Regs 1998
Summarise the consumer rights act 2015
T&Cs in consumer contracts must be fair, transparent
Unfair practice is where the T&Cs cause significant imbalance to the detriment of the consumer
Summarise contracts act 1999, how is it handled practically
Only named parties (privy) can enforce a contract / sue for a breach
Third parties can only enforce is contract expressly provisions it or third party is named
Practically, as long as insurers can see chain of ownership especially in marine. it is paid
What are the rates for insurance premium tax ? Who is responsible for paying this to HMRC?
12 - standard
20 - higher
The insurer / broker collects from insured. Paid on quarterly basis, part of Xchanging
How is IPT and Brokerage calculated?
On Gross premium, prior to any brokerage or tax deductions.
GWP = 1000
Brokerage = 20% therefore £200
IPT = 12% therefore £120
Net Premium = 1000 - 200 -120 = 680
What are the requirements and aims of the SM&CR, what are the three parts?
Requirements:
- Statement of responsibilities
- Map of responsibilities - how they all stick together
- Pre-approval by regulators
Aims:
- Assign responsibility to staff, making sure they understand
- Improve conduct at all levels
Parts:
- Senior Manager’s regime
- Certification regime
- Rules of conduct
What is the Senior Manager’s regime? Who does it apply to?
List of responsibilities called SMFs, requires pre approval from PRA and FCA
Applies to execs, non execs, and heads of each function
What is the certification regime?
Annual review of individuals who do not hold SMFs but can cause significant harm to customers / firms
Under rules of conduct, name all 5 rules for individual conduct
Integrity
Skill, care and diligence
Cooperative with FCA and PRA
Pay interest to customers
Observe proper market conduct
Under rules of conduct, what are the senior manager conduct rules?
SC1 - Control business effectively
SC2 - Comply with regulator requirements
SC3 - Responsibly delegation
SC4 - Disclosure of FCA or PRA rules
Who does the compliance officer report to? And who is it regulated by?
Board of directors
FCA & PRA
Delegation of responsibility is not permitted
Who is the MLRO regulated by?
PRA & FCA
Give an example of insurance who would charge higher insurance band tax
Extended warranty
What are the 6 characteristics of an individual being fit and proper?
Honesty, Integrity, Reputation
Financial soundness
Competence
Capability
What is the purpose of Contracts Right of Third Parties 1999
To provide parties not originally involved the right to enforce a contract
